Forum Thread

Bear Creek Reservoir Topics

(Bear Creek Reservoir Specific)

9 messages

Updated 11/3/2023 6:12:58 AM

Off-Topic

Lakes Online Forum

83,605 messages

Updated 4/25/2024 9:33:24 PM

Boat Maintenance

Lakes Online Forum

5,193 messages

Updated 4/3/2024 3:47:36 AM

Bear Creek Reservoir Fishing

(Bear Creek Reservoir Specific)

0 messages

Updated

Jokes

Lakes Online Forum

4,169 messages

Updated 4/15/2024 11:05:05 PM

Sports

Lakes Online Forum

4,260 messages

Updated 3/24/2024 9:24:45 AM

Grilling & Recipes

Lakes Online Forum

2,976 messages

Updated 3/20/2024 11:53:43 PM

Tallapoosa River Topics

Lakes Online Forum

98 messages

Updated 4/15/2024 1:00:58 AM

Forum Usage Rules

Name:	water_watcher -	Reply
Subject:	Did Obama stick it to BP?
Date:	8/12/2010 7:14:15 PM

Let us take a closer look at the effect on BP's finances:

1. BP will establish a $20 billion fund, but will pay only $7 billion into
it during 2010.

2. BP is a British corporation, but has a very large operating entity in the
US but only about 30% of it's income is derived from the US .

3. By Generally Accepted Accounting Principles (GAAP), BP must book the
entire $20 billion expense in the year accrued. Therefore, they will book a
$20 billion expense in 2010, reducing their US tax liability by $7 billion.

4. Our dear leader also convinced this massive corporation to show their
concern for the "small people" by withholding dividends to their
shareholders for the last 3 quarters of 2010. This reduces their outward
cash flow by about $7.5 billion, including approximately 40% of that amount
to US citizens. Assuming that the Bush tax cuts will survive through 2010,
the US Treasury will lose another $450 million in taxes on that amount. We
won't even discuss the effect on the US economy.

Let us put the results into a table easily understood by most people:

BP Cash Flow:

o Escrow funding ($7 billion)

o Dividend saving $7.5 billion

o Tax savings $7 billion

o Net favorable cash flow : $7.5 billion

US Treasury Tax Receipts:

o BP Corporate income tax .... minus $7.5 billion

o BP Shareholders ..... minus $0.45 billion

o Net unfavorable tax receipts ..... minus $7.95 billion

Oh yeah ... Obama really stuck it to BP (NOT) .... he once again stuck it to the US tax payer. I guess we really should expect this. After all, our dear leader is the
most inexperienced man in ANY room he enters.

This is just one more reason why a 'community organizer' should NOT be
negotiating anything dealing with money and finances!

Bottom line: The $20 Billion BP is putting up will create a $7.5 Billion
positive cash for BP flow this year. But, Obama actually "thinks" he really
did something special and stuck it to them "kicked a $$" (his words).

In reality, BP executives are laughing at him while they thank him for suck a great idea to cut their tax burden and improve cash flow.

Name:	GoneFishin -	Reply
Subject:	Did Obama stick it to BP?
Date:	8/12/2010 8:54:46 PM

Lotowner posted the same bit of nonsense back in July and now you do the same. Jim Dandy covered it quite well when he wrote “Generally, contingency reserves are not deductable for tax purposes until paid. A $20B reserve would have to be recorded for GAAP (financial) reporting, but only the $7B paid is a tax deduction. Still yields a $2.45B tax benefit”. Maverick said it best “What is the old saying if you do not know of what you speak then do not speak”. To repeat for your benefit Waterboy “if you do not know of what you speak then do not speak”.

Name:	water_watcher -	Reply
Subject:	Did Obama stick it to BP?
Date:	8/12/2010 10:12:29 PM

You are wrong (as usual) ... I am a CPA (in 3 states - PA, NY, GA) as well as an attorney in GA.

Sorrry you are misinformed ... I guess they don't teach you GAAP at Wal-Mart security school.

Name:	water_watcher -	Reply
Subject:	Did Obama stick it to BP?
Date:	8/12/2010 10:18:32 PM

Look up schedule M adjustments and you will not see that it would be excluded for tax purposes. The ONLY time it would is if the probability of expense can not be determined. Not the case here ... and if it did not turn out to be $20 billion, then they adjust their NOL for that year.

Keep in mind a company the size of BP is probably 5 years behind on their returns being reviewed and they exhaust extensions to be able to research and get tax rulings on questionable items.

The only person that never knows what he is talking about is you. So go stick your thumb up your backside and go away like Archie when he could never support his point of view with fact.

Name:	lotowner -	Reply
Subject:	Did Obama stick it to BP?
Date:	8/13/2010 8:33:50 AM

Did I see GF walking down the road with his hand behind his back and a scowl on his face! His Daddy has just whipped his butt for trying to bulls*&^ readers on this forum.

Name:	Maverick -	Reply
Subject:	Schedule M
Date:	8/13/2010 1:46:38 PM

Will I am not a Dem by any means, I would have to say the following: - Will BP get a tax break for the $20 million - Yes, if they actually end up paying such. - Are they entitled under the tax law to received tax benefits related to NOLs - Yes - Will they receive at tax benefit for all the monies being paid out to settle individual claims- Yes - Will all the claim recipients have to pay taxes on said monies (hope these folks realize such) - Yes But what I will say I would be willing to bet that if BP takes the entire $20 billion escrow as a tax deduction this year (as monies are being paid out over 4 years), they are opening themselves up for IRS audit / litigation. As I still say said payments are deductible in the year incurred, similar to reserves for discontinued operations, and other such reserves. Now with all that said did Obama drop the ball on this, yes. As what he should have agreed to is the $20 billion and not tax benefit. Sort of like what was agreed to with other companies in the past that have settled with the SEC.

Name:	GoneFishin -	Reply
Subject:	Hey MAVERICK
Date:	8/13/2010 5:30:40 PM

Why did you agree with Jim Dandy on July 26 but now disagree? Lotowner posted the same as Waterboy. I am not a CPA but just a highly educated and refined gentleman. I know M&MS but not Schedule M.

Name:	Maverick -	Reply
Subject:	Hey MAVERICK
Date:	8/13/2010 6:27:35 PM

I do not necessarily agree. Question is to substance of the agreement. If it is agreed up settlement paid over a 4 year period then there would be a basis for a current year tax dedcution. However, if it is a reserve fund for further potential expenses, then I do not agree as such is a contingent liability and such is not deductible till the year incurred. From a GAAP standpoint a contingent liability is recorded for book purposes when it is highly probable there is a future liability, however for tax purposes said expense is not recognized till incurred. Another example would be a Reserve for Bad Debts, for GAAP purposes you record such reserve based on your best estimate and for tax purposes you receive a deduction when the bad debt is actually written off the book. So question remains is the $20 billion a settlement or a reserve and I do not think any on outside BP and the US government really knows the answers, do you???

Name:	water_watcher -	Reply
Subject:	Hey MAVERICK
Date:	8/13/2010 9:23:07 PM

You are correct on all accounts Mav .... it all depends on the certainty of the reserve if it is deductible for tax purposes in the year taken. GAAP requires estimate of "potential" loses to also be recorded to fairly present the financial position of a company (as you pointed out) like bad debts and reserve to shut down a operation or liability for severence if a big layoff is planned. But the certainty of the loss for the Gulf fund is very clear and will be most likely higher. I am sure BP for book purposes will come up with an even higher number, but what they can deduct is what is determined to be certain and/or probable.

Big corporations (I worked for one for a while) always take more risk with tax deductions ... and large corps like BP are audited every year and normally have IRS agents officed right in the tax dept. The IRS and the company knows that with every audit it is a negotiation .... ie: ok you can disallow this, but you will let this go. It saves everyone time and engergy. Only the biggest get challenge and settled in tax court.

Name:	GoneFishin -	Reply
Subject:	My Opinion
Date:	8/13/2010 9:42:36 PM

Based on comments from both Mav and Waterboy and my independent and in depth research, I agree with both.

Name:	GoneFishin -	Reply
Subject:	Hey H_Knobby
Date:	8/13/2010 9:53:36 PM

I am indeed a gentleman. I married a blonde and Gentlemen Prefer Blondes. Changing the subject, do you fish at Toledo Bend??

Name:	MartiniMan -	Reply
Subject:	Did Obama stick it to BP?
Date:	8/14/2010 9:00:07 AM

I know I am late to this debate and I think it has been answered already but I know for certain that our multi-national clients take an income statement hit when they book environmental reserves. And that is long before they pay it out. All these firms are c-corporations which are all taxed on an accrual basis. What was stated previously would be true if they were taxed on a cash basis but c-corp's are not allowed to do so. Therefore they pay taxes and take deductions before they either receive the actual cash revenue or remit cash for expenses.

What is also a nice feature for us in the environmental business is let's say the reasonably estimable remediation cost for a project is $15M and we achieve closure for $10M our client gets to book $5M in revenue that tax year. Yes they pay taxes on the revenue but that is really just repaying the prior deduction they took when they booked the reserve. More importantly it is always good for my clients who are usually just a drain on the bottom line to actually add to profits. My biggest success was turning a $25M reserve into a $3.5M project. The general counsel for this company would shake my hand every time I saw them and they sent the entire team to Montana for a fly fishing and horseback riding trip.

Quick Links
Bear Creek Reservoir News
Bear Creek Reservoir Photos
Bear Creek Reservoir Videos